But a system already exists to provide many of the same failsafes. Automatic Train Control (ATC) is installed on practically all of today's locomotives, and support infrastructure is in place on most track. With Amtrak's new PTC system not due to go online until the end of this year, and freight lines supporting legislation that could give them up to five more years to implement PTC, its nearly century-old predecessor is currently the only line of defense between engineer error and further tragedy.

For all its age, ATC is surprisingly robust. It lacks PTC's ability to intelligently track train movement systemwide, but it can detect excessive speed and react to it. It would have engaged Train 188's emergency brake as or before it entered its final, deadly curve.

However, the older system was not activated on the northbound side of Frankford Junction, where Amtrak 188 derailed. Generally, ATC is only selectively activated across the nation's rail system.

The roots of Automatic Train Control stretch back to the 1920s. In its original form, it simply sent constant electrical pulses down sections of steel track. These pulses travelled through a trains' wheels and into the locomotive, where they were translated into in-cab signals which primarily communicated speed limits to engineers.

The system got a major upgrade in the 1950s courtesy of the Pennsylvania Railroad, which wired the signals to engines' 'dead man switch.' If an engineer didn't respond properly to a signal to slow, the brakes would be automatically engaged.

One shortcoming of ATC is that its speed signals are hardwired, and originally topped out at 80 mph. As modern trains began to regularly reach speeds of 120mph or more, the system's relevance waned.

This was highlighted in two near-disasters, one in the late 1980s at Elizabeth, N.J., and another in 1990 at Boston's Back Bay, both involving trains entering curves at excessive speeds. Following those incidents, the Federal Railroad Administration mandated that ATC be installed and activated on those curves--as well as on the southbound side of the Frankford Junction curve. Designers also added a wider range of speed levels.

But generally, ATC is only activated on specific stretches of rail deemed risky by railroad managers. Amtrak CEO Joseph Boardman, speaking with the Philadelphia Inquirer following the Amtrak 188 derailment, speculated that because northbound trains at Frankford Junction would have been expected to be going slower as they left Philadelphia, ATC failsafes weren't deemed necessary on that side.

That sort of selectivity seems to be rooted in a mix of cost concerns and more abstract matters of railroad culture. According to a source in the rail construction industry, the hardware to activate ATC along the northbound section of Frankford Junction would have cost under $40,000 (the system was turned on quickly on that section after the crash of Amtrak 188). It's a small number when weighed against the likely tens of millions of dollars in damages it might have prevented, but more prohibitive when multiplied across tens of thousands of miles of rail.

The source also said, though, that Amtrak planners saw automatic controls as impinging on the autonomy of engineers. Railroad engineers are at pains to distinguish themselves from, for instance, subway engineers, who monitor systems that are largely automatic.

Maybe you've muttered it to yourself, in a moment frustration, as you tap the steering wheel and stare at a persistent red.

As Dr. Steven Smith points out, it's literally true.

"The way conventional systems work, you preprogram those timing systems in advance," he explains. "But as soon as you install them, they start to age. Patterns and flows are continually evolving."

Reprogramming a single intersection as population and geography shifts costs thousands of dollars--so some municipalities rarely get around to it. The signal patterns keeping you stuck in traffic may be three to five years out of date, if not more.

The resulting inefficiencies multiply into the broader economy. The Texas A&M Transportation Institute's Urban Mobility Report found that in 2011, congestion cost the U.S. an aggregate $121 billion dollars, up from just $24 billion in 1982.

Smith is hoping to change that. On top of his position as a research professor at Carnegie Mellon, he's the head of Surtrac, a startup that's applying cutting-edge artificial intelligence and planning to traffic management. Surtrac's smart traffic signals rely on advanced sensors and powerful processing to update their patterns, not every few years, but every few seconds, in response to shifting traffic volumes and unexpected events like accidents or road closures. They've been deployed in a growing pilot study in Pittsburgh's East Liberty neighborhood since 2012.

Smith is quick to point out that he didn't invent the concept of dynamic traffic signaling. Los Angeles installed one of the earliest such systems, now known as the Automated Traffic Surveillance and Control system, in preparation for hosting the 1984 Olympics. It's still busy coordinating over 4,500 traffic lights through a powerful central computer, which makes timing decisions with less and less human input.

Smith is convinced, though, that centralization is a weakness of systems like the one in Los Angeles. Instead, Surtrac lets each signal make its own traffic management decisions. Though the signals share information with their neighbors, there's no central control, and no active human management.

"A few months after we originally installed the pilot, one of the major arteries through our area got cut off," Smith says. "Traffic patterns changed completely--we didn't do a thing."

What emerges, though, can look highly coordinated.

"By communicating with your neighbors, information can propagate multiple hops," explains Smith, "So you can actually end up building a reasonably long-horizon plan in a distributed way."

Surtrac's signals cooperate in much the same way groups of ants or birds do in nature. This approach, sometimes referred to as "swarming," has become frequently discussed as a way to coordinate groups of autonomous drones for tasks such as surveying or search and rescue. Advantages of the approach include scalability--additional lights can be added very easily--and durability--one unit can go down, and the rest will automatically adjust to compensate.

The results Surtrac has achieved in Pittsburgh are dramatic. Smith says travel times in the pilot area have been reduced over 25%, thanks mostly to a 40% reduction in idling. That also translates into a 21% emissions reduction. Those results significantly edge out the 16% congestion reduction achieved by the Los Angeles system, though Surtrac's results are from only 24 traffic lights. The pilot, funded by local foundations and public-private partnerships, will be expanded this summer to include 25 more signals.

With the expansion, Surtrac's adaptive technology will get the best test so far of its effectiveness. The city will first be re-timing the lights on a conventional model, and that setup will run while Surtrac installs its smart system. That means they’ll be measured against a conventional setup at its freshest.

Smith is confident of the outcome. "A lot of the conventional wisdom is that adaptive signals can't work in dense urban areas," he says. "We're definitely proving that wrong."

]]>http://fortune.com/2015/07/13/swarming-traffic-lights/feed/0Surtrac Signal in East LibertydzanemorrisThis is how much a cybercrime blackout would cost the U.S.http://fortune.com/2015/07/09/cybercrime-blackout-cost/
http://fortune.com/2015/07/09/cybercrime-blackout-cost/#commentsThu, 09 Jul 2015 14:30:59 +0000http://fortune.com/?p=1203815]]>While the simultaneous technical breakdowns of the New York Stock Exchange, United Airlines and Wall Street Journal on Wednesday weren’t connected, it sparked concerns of the damage an all-out cybercrime blackout could cause if such a glitch reached our power systems.

The extent of the economic damage can be estimated in one massive sum: $1 trillion. That’s according to a recent study by specialist insurance company Lloyd’s and University of Cambridge’s Centre for Risk Studies.

The report looked at two scenarios. One where a group of terrorists or “disgruntled insider” hackers break into the power system and bring 50 of the almost 700 generators in the northeastern U.S. offline, resulting in a blackout that lasts about 4 days. The damage: $243 billion in immediate and tangential economic loss.

The second scenario is where things get even worse. A group of hackers target the U.S. power grid and take out twice as many generators for the same amount of time. The economic damage more than quadruples to $1 trillion, or about 6% of U.S. GDP.

"This scenario shows the huge impact and havoc that could result from a major cyber attack on the U.S.,” said Tom Bolt, director of performance management at Lloyd’s. “The reality is that the modern, digital, and interconnected world creates the conditions for significant damage.”

Such a blackout would reach across 15 states, including New York City and Washington D.C., leaving 93 million people without power. The damage includes factors like a rise in mortality rates as health and safety systems fail, a decline in trade as ports shut down and transportation chaos as infrastructure collapses.

While such an attack is technologically possible, noted Lloyd’s, it isn’t necessarily likely. The report sets the “benchmark return period,” or an estimate of the likelihood of such an event, at 1:200. Lloyd’s, which is in the business of insurance, warns that the industry could lose upwards of $71 billion from such an attack.

]]>http://fortune.com/2015/07/09/cybercrime-blackout-cost/feed/0175824058lorenzettifortuneWhy tweeting potholes and smart bridges won’t solve our infrastructure problemshttp://fortune.com/2015/07/06/high-tech-infrastructure-monitoring/
http://fortune.com/2015/07/06/high-tech-infrastructure-monitoring/#commentsMon, 06 Jul 2015 13:00:31 +0000http://fortune.com/?p=1200438]]>Last month, an advertising agency in Panama debuted a 'tweeting pothole'--a small disc that could be placed in a road defect, and would tweet a maintenance request to the nation's Department of Public Works whenever it was driven over. The stunt went viral in the U.S., a testament to the global nature of infrastructure frustration--and a hint at the ways technology can help.

According to the Federal Highway Administration, more than one fourth of major urban roads in the U.S. are rated in substandard or poor condition, and over 67,000 bridges are either closed or under use restrictions. Legislative shortsightedness has left federal highway funding subject to a series of stopgap bills that are hamstringing state-level efforts to plan for needed improvements, and even basic maintenance.

Dysfunctional highways cost all Americans, but the trucking industry catches the brunt. "We pay a penalty for rough roads," says Darrin Roth, vice president of highway policy for the American Trucking Association. Roth says potholes mean higher maintenance costs and lower fuel efficiency, while disruptions like bridge failures and wrecks add to emissions, labor costs, and the chance for accidents.

The ATA found that congestion caused by inadequate or closed roads cost the industry about $9.21 billion in 2013, a 1.4 percent increase in congestion waste over 2012. 141 million hours were lost. That's the equivalent of 51,000 truck drivers--and their chugging trucks--stuck in traffic for the entire year.

On Main Street, that adds up to about $29 per year in added costs to each American.

The tweeting pothole, in its scaled-down way, suggests tech's power to help. Providing an early alert, through Twitter or more formal channels, can keep a small fault from becoming a big one, or from causing too much damage or disruption in the meantime.

This is even more important for bridges. In 2007, the I-35W Mississippi River Bridge in the heart of Minneapolis collapsed--a failure the National Transportation Safety Board attributed to a combination of design flaws and excess weight. In addition to killing 13 people, the collapse rerouted about 140,000 daily vehicle trips for more than a year.

When it was rebuilt as the St. Anthony Falls Bridge, the I-35 span was turned into a "smart bridge" using 500 sensors measuring bridge loads, movement, and integrity. The data is monitored for signs of degradation by researchers at the University of Minnesota, in what amounts to a beefed-up version of the tweeting pothole.

Another important gridlock-busting technology is traffic monitoring cameras and high-tech urban traffic centers. The cameras allow much faster clearing of accidents from highways, which according to Roth is one of the most important ways to increase highway shipping efficiency.

Traffic centers also help manage urban traffic flow by timing lights. While these are traditionally manual affairs, the Pittsburgh-based startup Surtrac is demonstrating 25% reduced travel times with its swarmlike approach to 'smart' traffic signaling.

Even in the absence of street-level tech, truckers carry potential efficiencies in their pockets--literally. Just like the rest of us, smartphones help truckers plan routes as traffic and driving conditions shift. And trucks go one better, with systems able to plan things like acceleration based on topographic databases.

All that high-tech efficiency might dull the pain as states skip expensive lane expansions and even maintenance. But as Roth points out, a navigation system "doesn't solve the problem if all the alternative routes are congested."

Most of the roads we travel on, Roth says, are still rooted in the time of their construction in the 1950s and 1960s, when traffic loads were much lighter. It'll take Congress, not Google Maps, to give us the highways we need.

]]>http://fortune.com/2015/07/06/high-tech-infrastructure-monitoring/feed/0Highway trafficdzanemorrisLondon’s Heathrow Airport is set for a massive expansion…maybehttp://fortune.com/2015/07/01/londons-heathrow-airport-is-set-for-a-massive-expansion-maybe/
http://fortune.com/2015/07/01/londons-heathrow-airport-is-set-for-a-massive-expansion-maybe/#commentsWed, 01 Jul 2015 10:17:43 +0000http://fortune.com/?p=1198541]]>London’s Heathrow Airport, which receives more international flights from the U.S. than any other airport in the world, is about to get a major expansion, after a government-backed commission recommended building a new runway.

The expansion will boost capacity at Europe’s most important hub by over 40% to 740,000 flights a year, offering (in the long term) the possibility of much more competition–and consequently lower fares–on transatlantic flights. It will be one of the biggest infrastructure projects in the world in the next few years, expected to cost 17.6 billion pounds ($28 billion), with a further 5 billion pounds in new road and rail links.

The Commission’s report concludes a long and bitterly-contested review that pitted rival airports, residents, politicians and environmentalists against each other. On the one side, business has argued strenuously for investment to stop the U.K. being overtaken by up-and-coming hubs such as Amsterdam. Residents and environmentalists argue that Heathrow is already violating most acceptable norms on emissions and noise pollution.

Commission chairman Sir Howard Davies said expanding Heathrow “presents the strongest case and offers the greatest strategic and economic benefits–providing around 40 new destinations from the airport and more than 70,000 new jobs by 2050.

But the Commission’s recommendation is only that–a recommendation. Although it has expressed the clearest possible preference for Heathrow over Gatwick, a largely short-haul airport south of London, politics may yet force the government into a different decision.

Prime Minister David Cameron had promised not to expand Heathrow in the run-up to the 2010 general election, anxious to win more seats in electoral districts in London, and a u-turn will give huge amounts of political ammunition to other parties. A number of senior figures in the Conservative government had backed rival schemes, notably Boris Johnson, the outgoing mayor of London and Zac Goldsmith, the man most likely to be the Tories’ next candidate for London mayor. Channel 4 News reported a senior Tory as saying that Davies had dumped “a pile of steaming poo on Cameron’s desk.”

The PM does, however, at least have the consolation that he himself isn’t standing for re-election, and that his party has just won a fresh five-year mandate nationwide.

]]>http://fortune.com/2015/07/01/londons-heathrow-airport-is-set-for-a-massive-expansion-maybe/feed/0Heathrow Airport And Sipson VillagegeoffreytsmithThese two states actually have their finances in orderhttp://fortune.com/2015/06/09/volcker-state-budgets/
http://fortune.com/2015/06/09/volcker-state-budgets/#commentsTue, 09 Jun 2015 19:05:05 +0000http://fortune.com/?p=1167363]]>In a report released on Monday, the Volcker Alliance gave good marks to California and Virginia for having their financial act together. The nonprofit organization, which was founded by former Federal Reserve Board Chairman Paul A. Volcker, hopes the study’s findings may one day serve as a baseline for other states’ financial practices. They could use the help.

States saw their revenues dip by over $77.6 billion between 2008 and 2010, largely due to the recession. Volcker wants to “help rebuild public trust in government” and institute a states “grading” system in the future.

The goal of the report, which is titled "Truth and Integrity in State Budgeting: Lessons from Three States,” is to shine “a spotlight on opaque and confusing practices and [identify] more appropriate approaches,” according to a release. It’s an offshoot of a study conducted by the State Budget Crisis Task Force, which was chaired by Volcker, and came with an assist from former New York Lieutenant Governor Richard Ravitch, from 2011 to 2014, the report explains.

"We invite and encourage governors, legislators and all who are involved in this process to work with us in developing these approaches," said Volcker in a statement.

So, which states are the shining examples?

1. California

The state has revamped its budgeting practices, thanks to voters reforming budget approval requirements from two-thirds to a simple majority. Voters also approved a hike in sales and income taxes and voted for changes in the way corporations are taxed. The reforms led to a $254 million dollar surplus in 2013, along with California debt obligations going from $34.7 billion in 2011 to $26.9 billion in 2013.

2. Virginia

Virginia also received praise from Volcker. “Its budgeting practices provide for strategic planning for both revenues and capital spending, repeated revenue re-estimation, strict statutory constraints on borrowing, and an actively employed rainy day fund,” according to the organization. Virginia has also passed three major pension reforms and has raised taxes in a targeted way to help improve the state’s infrastructure.

New Jersey, on the other hand, didn’t fare quite so well due to its “chronic inability…to match its revenue streams with its expenses.”

]]>http://fortune.com/2015/06/09/volcker-state-budgets/feed/0Paul Volcker's rule and others are being blamed for volatility in the bond market.snyderfortuneThese are the buildings that make up the ‘cloud’http://fortune.com/2015/06/08/cloud-computing-buildings/
http://fortune.com/2015/06/08/cloud-computing-buildings/#commentsMon, 08 Jun 2015 14:00:16 +0000http://fortune.com/?p=1146716]]>You've got to admit, the concept of "the cloud" is one heck of a marketing coup. Somehow technology companies got the world to think that the Internet is as ubiquitous and fleeting as patterns of water vapor in the sky. But the Internet is far from gossamer--it's a jumble of copper cables and server stacks wrapped in the windowless walls of hulking urban structures. There are indeed interchanges on our infobahn, and they're called Internet exchange points, or IXPs--or colloquially, "carrier hotels." They are ultra-secure buildings that serve as nodes on a network that spans continents. They help connect Internet service providers to one another. They are the real "cloud." Here's a look at six of the world's largest.

The IXP landscape by the numbers

Worldwide facilities:

446

U.S. facilities:

82

Countries without IXPs:

87

Cost to build:

$20,000 to $40,000

--Andrew Nusca

One Wilshire Boulevard

WEST COAST: LOS ANGELES

Sandwiched between bourbon bars and boutique hotels, this unassuming high-rise in downtown L.A. is a hotspot for telecom firms. Why? Because it’s where fiber-optic cables from Asia and North America meet.Courtesy of CoreSite

By the numbers

Built:

1966

Size:

664,000 square feet

Stories:

30

Tenants:

300-plus

Sandwiched between bourbon bars and boutique hotels, this unassuming high-rise in downtown L.A. is a hotspot for telecom firms. Why? Because it's where fiber-optic cables from Asia and North America meet.

Towering. Massive. Immense. In a city as low and sprawling as Los Angeles, you can't miss the skyscrapers that stud the city's bustling business district, especially as you drive along the freeway toward the city's downtown district. It's easy to assume that these tall buildings house Hollywood executives or California bankers. Many do. But one of them, a 30-story structure called One Wilshire, is the most highly connected Internet point in the western U.S.

Miles of undersea cables link the Pacific Rim to One Wilshire. It is estimated that one-third of Internet traffic from the U.S. to Asia passes through the building. For this reason scores of service providers, online content distributors, and carriers call One Wilshire home. VerizonVZ, AT&TT, Amazon Web ServicesAMZN, and NetflixNFLX have all set up shop in the structure. Its biggest tenant is CoreSite COR, a national data center and collocation provider, which leases its space to more than 300 companies.

At the heart of the building is the Meet Me Room, a sort of neutral ground for the building's tenants to interconnect. It's in this room, which contains rows upon rows of cabinets like lockers lining a high school hallway, that CoreSite's data-center operators manage the flow of traffic throughout the facility. If one of the companies in the building wants to connect with another, CoreSite staff in the Meet Me Room ensure that a handshake takes place and traffic gets swapped. If One Wilshire is a carrier hotel, the Meet Me Room is its lobby.

One Wilshire was erected in 1966 as a standard office building. The 664,000-square-foot structure served the role for many years, but as traditional corporate tenants moved out in the early 1990s, telecommunications companies moved in, attracted by its proximity to AT&T's switching center two blocks down the road. At the time, such infrastructure was nascent, and telecom companies congregated in single locations. As the Internet boomed, so did One Wilshire, and the facility eventually became the de facto connection point for Southern California and beyond. How important is it? Consider: In 2013 it sold for nearly half a billion dollars and the highest price per foot ever paid for a downtown L.A. office building.

Given Los Angeles' reputation for earthquakes, there remains concern that a natural disaster could strike One Wilshire. If that happens, tenants would funnel Internet traffic to other facilities in the region, as far away as Arizona or Nevada. Down, but not out: The modern Internet lives on to fight another day.

--Jonathan Vanian

60 Hudson Street

EAST COAST: NEW YORK

It was built in the wake of the 1929 stock market crash as one of the most advanced telecommunications hubs in the world. Eighty-five years later it’s making neighbors of nations at the speed of light.Photo: John W. Cahill--Emporis

By the numbers

Built:

1930

Size:

1.8 million square feet

Stories:

24

Tenants:

400-plus

It was built in the wake of the 1929 stock market crash as one of the most advanced telecommunications hubs in the world. Eighty-five years later it's making neighbors of nations at the speed of light.

If a building could talk, 60 Hudson Street in lower Manhattan would have decades' worth of tales to tell. Completed in 1930--the same year that Fortune first went to press--the former Western Union Building towered over its New York City neighborhood. It was built to be a nerve center for the telegraph era. Today it's a nexus for the Information Age.

Sixty Hudson is one of the world's most important buildings for Internet connectivity--one of about a dozen, according to Andrew Blum, author of Tubes, a book about the Internet's infrastructure. It sits on the doorstep of America's financial and media hub and carries Internet traffic from the rest of the world to North America. Its Art Deco lobby and massive brown-and-red-brick fa?ade, which zig-zags back from the street and up 24 floors, are enduring symbols of its historic role as a first stop for transatlantic cable traffic.

Proximity to the major population centers of the U.S. was a key reason 60 Hudson was built where it stands today, less than a mile from the New York Stock Exchange. In a time of split-second financial transactions, on-demand movie streaming, and anywhere Internet, the building's coveted location--paradoxically--remains critical. "This building is important more than just to New York," says Jonathan Hjembo, an analyst for research firm TeleGeography. "It has key interconnections to Europe and to Latin America."

Today 60 Hudson's massive clay conduits hold miles of fiber-optic cable, not just copper telegraph wires, says former Telx exec Ben Gonyea. Their tremendous density remains a calling card. When the New York City Landmarks Preservation Commission designated 60 Hudson a historic site in 1992, it estimated that the structure once housed 70 million feet of wire and 30 miles of conduit. That was well before the Internet became a fixture in our lives.

It's anyone's guess how much wire or Internet traffic 60 Hudson accommodates today--the information is confidential and difficult to obtain. Here's what we do know: Telx, one of two major data-center providers in the building, is home to about 350 carriers. The other, EquinixEQIX, hosts about 150. So the next time you sell a share or order a package, remember: Your bits are likely flying through the Art Deco portals of 60 Hudson Street.

--Barb Darrow

International Internet Hubs

North America isn't the only game in town. Here are four key facilities on other continents.

Hong Kong Internet Exchange (HKIX)

ASIA, LOCATED AT THE CHINESE UNIVERSITY OF HONG KONG

The Hong Kong Internet eXchange is different from other exchanges in that its main purpose isn't to link out to the wider world. (Unsurprising for a city administered by China, though HKIX is spared from its Great Firewall.) Instead, the facility is meant to serve as a booster for the city's own internal connectivity. In fact, the whole point of the operation--better termed an intranet exchange--is to prevent traffic from having to route internationally (as in through the U.S., which dominates global Internet infrastructure like no other country). Call it a defensive play: While hiding out in the city in 2013, former National Security Agency contractor and whistleblower Edward Snowden told the South China Morning Post that Chinese University, where HKIX is located, was a prime hacking target for the notorious U.S. spy agency: "We hack network backbones--like huge Internet routers, basically--that give us access to the communications of hundreds of thousands of computers without having to hack every single one." The NSA declined to comment.

The Venice of the North has long been an important center for commerce and trade. The same holds today, electronically. Geographically situated between a number of important digital destinations--Frankfurt, London, Paris--the Amsterdam Internet Exchange serves as one of the biggest traffic routers in the world, channeling roughly 700,000 terabytes a month. Deloitte estimates that the digital infrastructure of the Netherlands added up to 19,000 jobs to the Dutch economy in 2013. AMS-IX is not quite the modern digital equivalent of the Dutch East India Co., but it is an incredibly important nexus in the global fabric of the Internet.

This German Internet exchange is a well-placed way station in the world's data-coursing nervous system. According to TeleGeography, DE-CIX Frankfurt--the flagship in a family that includes facilities in New York, Istanbul, and Dubai--is the No. 1 Internet traffic hub on the continent. During peak traffic times, the exchange can move data at a rate equivalent to processing 4 billion emails per second. While Germans reacted with outrage to revelations concerning the extent of the NSA's surveillance in their country, their indignation was checked when they learned that the BND, a German spy agency, had tapped the wires at DE-CIX.

PTT Metro S?o Paulo

SOUTH AMERICA

This Brazilian facility is the biggest and most trafficked Internet exchange in all of Latin America. Nearly 600 networks (including FacebookFB and GoogleGOOG) have taken up residence in the exchange--as many as the company's 24 other facilities combined. Because so many transatlantic submarine cables land ashore along Brazil's gigantic, meandering coastline, the country has quickly become a telecommunications hotspot. The nation has pushed aggressively to expand its digital infrastructure and rely less on the U.S. and its well-known tech giants, especially after learning that it was the second-most-snooped-upon by the NSA--after the U.S., of course.

--Robert Hackett

A version of this article appears in the June 15, 2015 issue of Fortune magazine with the headline ‘Guardians of the Digital Galaxy.’

]]>http://fortune.com/2015/06/08/cloud-computing-buildings/feed/0CLO06_15_Cloud_Big_Data_60 Hudson_1 Wilshire mergesoccerrogue1 Wilshire Blvd. CoreSiteWestern Union Building. 60 Hudson StreetAmsterdam Internet Exchange (AMS-IX)DE-CIX internet exchangeIn Spain, the fight for Catalan independence comes down to cash moneyhttp://fortune.com/2015/01/30/spain-catalonia-independence-taxes-economy/
http://fortune.com/2015/01/30/spain-catalonia-independence-taxes-economy/#commentsFri, 30 Jan 2015 15:03:32 +0000http://fortune.com/?p=968303]]>When the president of Spain's Catalonia region Artur Mas recently announced that the region would hold early elections in September, his party's spokespeople were quick to characterize the elections as a plebiscite on Catalan independence from Spain.

Some 1.8 million voters in Catalonia (about 30% of the electorate) supported independence in a straw poll last November for several reasons. But one of the most common is that the central government in Madrid takes more in taxes from the wealthy region than it returns in spending.

In a poll taken by the regional government last October, 80% of those surveyed agreed that the central government took too much of their tax money and made decisions that hurt Catalonia's public infrastructure.

The oft-quoted version of the sentiment is Madrid nos roba: Madrid robs us.

And it is accurate...to a point.

That a wealthy region pays more in taxes than it receives in federal spending is not necessarily nefarious. Governments often redistribute tax money to compress the gap between rich and poor regions.

"The problem of fiscal discrimination in Catalonia is similar to what happens in a rich area of any place," says Santiago Lago, a professor of economics at the University of Vigo. "If you take similar regions, rich areas in France or Italy or the UK, the results are very similar."

In the United States, for example, New Jersey gets only $0.88 back in federal spending for every $1 it puts in. Meanwhile, Mississippi gets $3.07, according to a 2014 study from finance site Wallet Hub.

Put another way, according to Dartmouth College professor of government Dean Lacy, New Jersey, which in 2010 had an average net per capita income of almost $58,000, got shorted $3,900 per capita in federal spending. Mississippi, with per capita income of $25,000, got an extra $7,900.

Lacy says these transfers compress the wealth gap between states but do not significantly reorder the states in terms of wealth.

Put in those terms, Catalonia's tax contribution falls in line with that of wealthy regions in other parts of the world. But that's where things get tricky.

For many Catalans, the complaint is not simply that Catalonia subsidizes poorer regions of Spain. Rather, it is that Catalonia does so to such an extent that many of Spain's other regions have more resources per capita than Catalonia to spend on essential services. The redistribution of tax money in Spain doesn't merely bridge the wealth gap between regions; it reorders the divide.

"In the worst of all worlds, which we've had for 35 years, there has been elevated solidarity. Regions that collect 120% [of average tax revenue per capita] end up with 90% [of average government resources per capita] while others go from 70% to 110%," says Guillem L?pez Casasnovas, a professor of economics at Barcelona's Pompeu Fabra University who serves on CAREC, an economics council that advises the Catalan president.

According to a recent study co-authored by L?pez, in 2012 Catalonia collected 118.6% of the national average of taxes per capita, putting it in third out of 15 regions. But after redistribution, its resources fell to 99.5%, putting it in 11th place. At the other extreme, the region of Extremadura collected 76.6% of the average in taxes, putting it in 14th place, but after redistribution it ended up with 111.8%, putting it in third.

More galling to many in Catalonia is that the regions of Pa?s Vasco (Basque Country) and Navarra have a special deal that lets them keep almost all of their tax receipts instead of forwarding them to the central government. According to L?pez, that leaves them with 40% to 60% more in resources per capita.

"The government in Pa?s Vasco and Navarra has a lot more money so they have much better services: better school, better hospitals," says Lago. "The issue of Pa?s Vasco and Navarra generates a lot of feeling of bad treatment and is very problematic."

Catalan pro-independence politicians have used the narrative of bad treatment to sell the idea that Catalonia would be better off alone. A report published by Catalonia's regional government claims that an independent Catalonia would have more resources, to the tune of 6% of the region's GDP. The subsequent increase in spending would then deliver a multiplier effect across Catalonia's economy.

Not everyone is convinced. Anti-independence groups claim that businesses would flee Catalonia if it seceded without first reaching an amicable divorce with Spain, which seems unlikely. One group, the Societat Civil Catalana, argues that secession would lead to the destruction of up to 447,000 jobs, 34.4% unemployment, and a loss of EUR20 billion in foreign direct investment.

For people like L?pez, the right solution is less dramatic than secession: a fiscal pact between the central government and the regions that demands that tax money be used for essential services and to modernize regional economies--not to offer toll-free highways and hire public bureaucrats, a common Catalan complaint about poorer regions--and that the redistribution of tax funds compress the wealth gap but not reorder the regions in terms of resources per capita.

]]>http://fortune.com/2015/01/30/spain-catalonia-independence-taxes-economy/feed/0Catalan Independence Rally In Barcelonasolster2Infrastructure: The State of the Union’s other winner?http://fortune.com/2015/01/20/infrastructure-the-state-of-the-unions-other-winner/
http://fortune.com/2015/01/20/infrastructure-the-state-of-the-unions-other-winner/#commentsWed, 21 Jan 2015 04:08:25 +0000http://fortune.com/?p=952983]]>President Obama only gave a brief nod to his trade agenda in his State of the Union speech Tuesday night. But it is a priority that has a strong likelihood of becoming law because trade, unlike most of his other proposals, also draws support from both the Republican leadership in Congress and the powerful business lobby.

But there's another initiative the president talked up that could thread a similar needle. He also used his bully pulpit to tweak Republicans for fixating on building the Keystone XL pipeline, the 1,100 mile spigot that would carry crude from Canada to the Gulf Coast. Instead, he exhorted them to rally along with Democrats around an infrastructure spending plan that he said "could create more than thirty times as many jobs per year, and make this country stronger for decades to come" while rebuilding crumbling roads, bridges and ports.

Indeed, infrastructure improvements draw broad support from pressure groups across the ideological spectrum. NAM president Jay Timmons brought it up, unprompted, earlier Tuesday in an interview with Fortune, as an area of agreement between business interests and the AFL-CIO. The question, of course, is how to pay for the projects. Transportation funding runs out later this year, a possible forcing mechanism for Congress to consider longer-term solutions. Republicans this year have signaled they may be willing to reconsider their longstanding opposition to raising the gas tax as one way to pay for new infrastructure investments. Call it another crack in the dam -- or better yet, don't.

]]>http://fortune.com/2015/01/20/infrastructure-the-state-of-the-unions-other-winner/feed/0Highway traffictorynewmyer2015 Investor’s Guide: Don’t buy this, buy that—Real Estate and Industrial Stockshttp://fortune.com/2014/12/04/2015-investors-guide-industrials-real-estate/
http://fortune.com/2014/12/04/2015-investors-guide-industrials-real-estate/#commentsThu, 04 Dec 2014 12:00:13 +0000http://fortune.com/?p=886408]]>Sometimes the smartest actions are the ones you don't take. That old dictum seems relevant at a moment when the markets are a paradox: Each new high only makes many veteran investors more nervous that disaster looms. Between lofty valuations, slowdowns from Europe to China, conflict from Ukraine to Syria, the end of the Fed's bond-buying binge, and more, there are many reasons for caution. That's why this year we decided to recommend not only investments to make but also ones to avoid. Smart defense is always wise, and the good news is that even in these precarious times, there are still opportunities to be found.

DON'T BUY REITs
Real estate investment trusts have bondlike qualities: They pay out their profits as dividends, and the latter tend to be predictable because they're based on long-term leases. They often thrive when interest rates are low because their rates outpace those of bonds. But by the same token, REITs often slump when interest rates rise. "REITs have performed better than expected because interest rates have not gone up the way that was predicted," says Michael Cuggino, manager of the $7 billion multi-asset Permanent Portfolio Fund. "But going forward in the new year, it's a tough one."

DO BUY INFRASTRUCTURE STOCKS AND (SOME) U.S. REAL ESTATE STOCKS
BlackRock's global chief investment strategist Russ Koesterich thinks a better alternative is infrastructure, a relatively new asset class now available through several ETFs and mutual funds. The ProShares DJ Brookfield Global Infrastructure ETF yields 3.5% and has more constituents (134, among them water-management companies, toll-road developers, and wireless-tower operators) than two of the major infrastructure indexes. And with a Republican-controlled Congress potentially greenlighting more energy infrastructure projects, Jay Bowen of Bowen Hanes & Co. is bullish on Kinder Morgan KMI, the largest U.S. transporter of petroleum and natural gas (which will soon relinquish its master limited partnership status).

At the same time, as the U.S. economy begins to look rosier, some investors think it's a good moment to buy certain real estate stocks that don't behave like REITs before they -really start to boom again. For example, David Rainey, co-manager of the top-performing $1.5 billion Hennessy Focus Fund, recently bought shares of Brookfield Asset Management BAM, which owns a real estate portfolio ranging from office buildings to energy infrastructure to timberlands but is not structured as a REIT. Marty Sass, whose firm M.D. Sass manages $7 billion, contends that the best opportunity is in sales of existing homes, which outnumber new-home sales 11-fold. Leading residential brokerage -Realogy RLGY is "the ideal play," Sass says. Realogy earns fat margins from its large franchise business--it owns broker chains Coldwell Banker, Corcoran, Century 21, and Sotheby's International Realty--but the stock trades at just 14.5 trailing earnings. Sass thinks it is undervalued simply because most investors have never heard of the parent company. But its brands, he says, "are the best in the business."

DON'T BUY UTILITIES
Dividend-seeking investors have surged into utility stocks in the past couple of years for their high dividends, but they might soon be jolted: All that buying energized valuations; the category now trades at 17.2 times trailing earnings, above its historical median of 14.8. Shares of electricity and gas providers also tend to short-circuit when interest rates rise, says the Leuthold Group’s Doug Ramsey, since they often have lots of debt. If rates rise over the next year, as is expected now that the Fed has stopped its stimulus program, "utilities won't be as defensive as people think," says Koesterich, who recommends underweighting the sector.

DO BUY U.S. INDUSTRIALS
Industrial stocks also pay hefty dividends. And their valuations are, at 18.4, barely above their historical 18.0 median. More important, industrials are expected to pump their earnings up 10% next year--five times what utilities will deliver. "I like industrials, because if orange is the new black, industrials are the new technology," says John Stoltzfus, chief market strategist for Oppenheimer. He's optimistic about everything in the sector, from defense products to equipment related to wind, water, and natural gas. Oppenheimer has an outperform rating on Honeywell International HON, which yields 2.1%, and Emerson Electric EMR (2.9%), both of which should sell more as consumers buy and heat more homes and manufacturing picks up. He's also bullish on General Dynamics GD as both an industrial and a defense play, and UPS UPS, which will benefit as people continue to buy more stuff online. "There's a certain level of comfort in owning them, and they offer plenty of opportunities," Stoltzfus says. "And as economic growth becomes more clear, the markets will recognize these companies." Robert Zagunis, who won't buy a stock for his $5.5 billion -Jensen Quality Growth Fund unless it has posted at least 15% returns on equity for 10 years straight, is placing his greatest weighting in industrials, including 3M MMM and United Technologies UTX, which have exposure to both emerging and U.S. markets. He cites the fact that 3M has upped its dividend every year for a half-century (it now yields 2.2%) and that revenues in its China business are steadily ascending. "People might hear 3M and think big, stodgy kind of company," Zagunis says, "but it continues to have double-digit net margins."

]]>http://fortune.com/2014/12/04/2015-investors-guide-industrials-real-estate/feed/0buybox-industrialjwiecznerWhy China keeps throwing trillions in investments down the drainhttp://fortune.com/2014/12/01/china-investment-losses-infrastructure/
http://fortune.com/2014/12/01/china-investment-losses-infrastructure/#commentsMon, 01 Dec 2014 20:56:22 +0000http://fortune.com/?p=886405]]>There are two indisputable facts about China's mammoth investments in its infrastructure and factories. One, they are a growth engine, accounting for roughly half of the country's GDP increase since 2000. The other fact is that China's investment rate, averaging 43% of GDP since 2000, is greater than any other major economy in history.

Many question whether such investment in the Chinese economy can maintain its role as the nation's primary driver of growth. Most economists believe that China must shift from an investment-based growth model to one focused on consumption. (According to the World Bank, Chinese household consumption was only 34% of GDP in 2013.) Amid this debate, one question has gone unanswered: How much bang has China got for the trillions of bucks it has poured into its physical capital over the last two decades?

A recent study performed by two economists affiliated with the Chinese National Development and Reform Commission (NDRC), Beijing's powerful economic planning and regulatory agency, offered a revealing glimpse into this puzzle. The economists examined two indicators: the delivery rate of completed fixed-asset investment projects and the incremental capital output ratio (ICOR), which measures how much additional capital is required to generate an extra unit of GDP growth. The researchers concluded that both measures show an alarming increase in wasteful and ineffective investments in China.

The delivery rate of completed capital projects, which was 74-79% in the late 1990s, has now fallen below 60%. This implies that nearly 40% of Chinese investment projects are either not finished on time or not completed at all.

The even more alarming figure, which made headlines around the world, is that ineffective investment has cost China $10.8 trillion since 1997. Sixty-two percent of the wasteful investment--$6.8 trillion--was made after 2009, when China went on an investment binge to stimulate its economy.

The two scholars reached this startling conclusion by noting that China's ICOR has risen 50%, from 2.6 (for the period of 1979-1996) to 4 (for the period of 1997-2013). In practical terms, this means that before 1997 China needed $2.60 in investment to generate one dollar of GDP growth; today, China needs $4 to produce a dollar of GDP growth. The rise of ICOR, according to the researchers, indicates that China's investments have become less efficient.

To be sure, one can raise technical questions about using ICOR to estimate investment efficiency. A country's ICOR can rise as its economy becomes more capital intensive. Obviously, agriculture requires less capital than manufacturing. In China's case, ICOR was 0.3 for agriculture but 5.9 for manufacturing during 2001-2007. Therefore, in all likelihood, the estimate that China has flushed $10.8 trillion down the drain since 1997 should be taken with caution.

Nevertheless, the two audacious government-affiliated economists have asked the right question even though their conclusion may not be totally convincing. Their study highlights a serious problem that many in the international business community have overlooked: the role of the state in making investment decisions in China.

Based on official data, the Chinese government and state-owned enterprises invest $2.3 trillion a year in infrastructure and factories (43% of the country's total investment). Since government-funded investments are driven by political decisions, these investments are more likely to fall victim to waste and corruption. Research conducted by a scholar at China's Tsinghua University's School of Management shows that government-funded infrastructure projects, contrary to conventional wisdom, undercut China's productivity. Even when the Chinese government invests in factories, its decisions can result in poor outcomes. This is the case with the manufacturing sector. Every self-respecting local government in China, it seems, wants to own steel mills, cement factories, and auto plants. As a result, these sectors are plagued by overcapacity across the country, which destroys investment returns.

To be sure, there is plenty of bad news here. For example, failed investments saddle Chinese banks, which finance most of the investments made by the Chinese government and SOEs, with mountains of non-performing loans. But there may be a silver lining behind China's abysmal investment record. The shocking inefficiency of Chinese investments also means that reforms could potentially generate significant benefits. With a more efficient investment system, Beijing could cut down on its overall investment and channel more of its resources into encouraging consumption, which would make China's economic growth more sustainable in the long run.

Let us hope that, instead of punishing the two economists for revealing China's dirty little secret, the Chinese government will get the message and start meddling less in the country's investment activities.

Minxin Pei is the Tom and Margot Pritzker '72 Professor of Government at Claremont McKenna College and a non-resident senior fellow of the German Marshall Fund of the United States

]]>http://fortune.com/2014/12/01/china-investment-losses-infrastructure/feed/0General Images of Chinese Economy From Zhuhaisolster2Can technology help us survive California’s drought?http://fortune.com/2014/08/11/can-technology-help-us-survive-californias-drought/
http://fortune.com/2014/08/11/can-technology-help-us-survive-californias-drought/#commentsMon, 11 Aug 2014 16:24:02 +0000http://fortune.com/?p=742650]]>More than 80% of California is now in a state of extreme drought, according to the latest assessment. The environmental conditions that residents are experiencing today actually began in 2011. Still, there seems to be no end in sight. Water costs are sky high, as you would expect, but Californians are paying the price in more ways than one. The state’s Central Valley agriculture industry, for example, stands to lose $1.7 billion this year as a result of what some believe is the worst drought to affect the region in 500 years. Some 14,500 workers could lose their jobs in an area responsible for half of the state’s agriculture and five percent of the entire nation’s.

How will California survive? For a problem of such massive scope, the solutions will be complex, experts say. One thing is certain: technology will play a key role.

Halla Razak is the director of public utilities for the city of San Diego. Diversifying the water supply has been a top priority, she tells Fortune, because more than 90 percent of San Diego’s water has historically been purchased from the Metropolitan Water District of Southern California. It became clear in 1990, when there was another drought, that the existing plan wasn’t sustainable, Razak said. It prompted officials to take a fresh look at alternatives.

Since 2007, per-capita water use in the San Diego region has decreased about 27 percent. Officials point to rebates, tools, and educational programs aimed at improving water-use efficiency as factors in the change.

“These are low-tech solutions,” Razak concedes. They are not like the brand-new and pricey reverse-osmosis desalination plant now under construction. The new Carlsbad Desalination Project, the work of the private developer Poseidon Water, is expected to open in late 2015. It will supply roughly 50 million gallons of water per day, which is about 10 percent of what the region uses each year, Razak says.

Desalination is something of a controversial topic. Though it is an established technology that has long provided drinkable water to many parts of the world, most notably the Middle East, it is also frequently criticized for its high energy demands.

‘San Diego’s most expensive source’

“We’ve been desalinating water for over 100 years,” says Peter Gleick, president of the Pacific Institute, a nonprofit that works with Fortune 500 companies on water solutions. “We know how to desalinate, but that’s not the long-term answer because it’s still extraordinarily expensive.”

Reverse osmosis technology has helped improve desalination’s energy footprint compared with past alternatives, Gleick says. Even so, the new Carlsbad plant “will be San Diego’s most expensive source of water,” he says.

In Gleick’s view, the “more mundane” technologies that help people use water more efficiently, from efficient toilets to irrigation equipment, are far more important. “Drip irrigation is not a new technology, toilets are not new, but there are new versions that let us save a tremendous amount of water cost-effectively,” he says. “They may not be sexy, but they’re frankly the smartest things we could be doing.”

A full 80 percent of the water used in California goes to agriculture, Gleick points out. “Farmers know how to implement drip irrigation. It’s not a new technology, but they’re learning new ways to do it.” Soil-moisture monitors and smart meters also help reduce waste. “It turns out that with the right feedback delivered in the right way, people cut their water use by 5 percent,” he says. “That doesn’t sound like a lot, but in a drought it makes a big difference.”

But reduction is not enough. As extreme drought conditions persist, many officials are looking at water reuse as an answer. In Orange County, used water is treated and fed back into the ground to replenish local aquifers. “They have innovative water treatment plants there and are treating it to high standards and then putting it to use,” Gleick explains. “In the old days, it would have been thrown into the ocean.”

Through a combination of water-saving practices, water reuse, and recaptured storm water, California could save up to 14 million acre-feet of untapped water, enough to supply all of California's cities for a year, according to a report published last month by the Pacific Institute and the Natural Resources Defense Council.

‘This is the real future for California’

Water reuse is also a focus in San Diego. The city of 1.3 million is currently in the planning stages of an effort called Pure Water, which follows in the footsteps of Orange County. The new project calls for more reuse of the water the city has already been cleaning but reserving for non-potable uses only such as irrigation.

“We in San Diego aren’t as lucky as Orange County in that we don’t have good aquifers underground,” Razak says. “But we do have large reservoirs.”

The Pure Water plan involves building a plant that will treat used water with three different techniques: membrane filtration, reverse osmosis, and ultraviolet disinfection. Why so many steps? To make it “as pure as can be,” Razak says. The renewed water is then piped to local reservoirs, where it will sit for six months. Then it will be treated again before it’s mixed with other water sources for potable use.

Eventually, Razak hopes to skip the reservoir and subsequent stages, since already “the water is being treated to the best standard of quality of any other raw water we get in the county.” Those later stages are “mostly to improve people’s acceptance of this process,” she admits.

The goal is to purify 15 million gallons per day by 2023. Longer term, officials hope the purification facility supplies more than a third of the region’s water by 2035, Razak says.

“I honestly believe this is the real future for California,” she says. “We take pristine water from rivers and lakes; we treat it and we clean it; and then we use it. Then we treat it again to a pretty high standard before we dispose of it in the ocean and rivers. We’ve already spent time and energy, but then we’re letting go of it. The best thing for California is once we already possess that water and it’s treated to a high level, to treat it further and reuse it.”

Simon Gottelier, who runs the water strategy at the asset management firm Impax, agrees. “This is taking treated wastewater that would normally go out into the ocean and using it on a grand scale,” he says. “If I had to say how California will cope going forward, my sense is these water-reuse projects are going to be one of the major ways California can do it.”

‘We’re trying to offer a path to market’

To make an impact in drought conditions, “there are two legs you have to walk on,” said John Briscoe, a professor of environmental engineering and environmental health at Harvard University and the director of the Harvard Water Security Initiative.

“First, you have to have infrastructure,” Briscoe explains. “Second, you have to have institutions”--that is, rules and organizations to govern the effective management of water.

As in financial investing, it is important to have a diverse “portfolio” of water sources, Briscoe says. Cheaper ones can be used when water is plentiful; more expensive ones can sustain an area during difficult conditions.

Briscoe points to Australia, home of a new futures exchange focused on water, for its success dealing with drought. “They have a very flexible set of institutions with very clear signals about the value of water use,” he says. “Once water has this value, there’s a huge call for new technology. It becomes more information- and technology-intensive.”

Globally, the water market is worth roughly half a trillion dollars per year, says Scott Bryan, chief operating officer at the clean water nonprofit Imagine H2O. “If you look at the magnitude of the ecological and humanitarian need plus the market need, why don’t we have more entrepreneurs and investors looking into this issue?” Bryan asks. Even in California itself, “very little of the tech boom focuses on our region’s most pressing issue,” he adds.

For the last five years, Bryan’s firm has offered an annual business innovation competition through which early stage entrepreneurs and researchers can submit their ideas for judging by a panel of venture capitalists and other experts. It then gives the top 12 contenders a place in its accelerator program. “Our winners and finalists now represent one in every six dollars of early stage financing in the water sector,” Bryan says.

“What we’re trying to offer is a path to market,” he explains. “We have a lot of great technology out there, it just doesn’t make it to market. A lot of our work is reaching out to people who can bring new business models to the sector--that’s almost more important than new technology.”

Correction, August 12, 2014: An earlier version of this article misstated the date when the Carlsbad Desalination Project is expected to open. It is late 2015.

]]>http://fortune.com/2014/08/11/can-technology-help-us-survive-californias-drought/feed/0At left, Folsom Lake in March 2011. At right, Folsom Lake in January 2014.soccerrogueGE pledges $2 billion to boost African energy infrastructurehttp://fortune.com/2014/08/04/ge-pledges-2-billion-for-african-energy/
http://fortune.com/2014/08/04/ge-pledges-2-billion-for-african-energy/#commentsMon, 04 Aug 2014 17:14:36 +0000http://fortune.com/?p=763742]]>General Electric has pledged $2 billion in energy development across Africa over the next four years, which will increase access, reliability and affordability of core infrastructure through the region.

The funds will be used for facility development, skills training and sustainability initiatives, the company announced Monday. The pledge came ahead of a U.S. summit meeting of nearly 50 African leaders that kicks off in Washington, D.C., this week.

The summit, hosted by President Obama, is meant to showcase American interest in the continent while shepherding a series of government-corporation deals.

GE GE brought in more than $5.2 billion across 30 African countries in 2013 and has won more than $8.3 billion in orders across the continent in the last 12 months. Africa has emerged as the most promising growth region for the company.

"GE has long been committed to unlocking Africa's potential but, as our most recent deals in the region demonstrate, we believe there is still more that we can do,” Jay Ireland, CEO of GE Africa, said. “Our investments in infrastructure and people only strengthen our role as a key partner in helping to build Africa's future."

The investment enlarges GE commitments in Africa, which include several country-specific projects such as supplying new aeroderivative gas turbines in Algeria and Nigeria to increase grid reliability and delivering nearly $1 billion in railway and power equipment to Angola.

GE CEO Jeff Immelt said Africa is a frontier for continuing growth opportunities. Rich natural resources and rising demand for electricity have primed Africa for more investment, though political volatility could pose a significant risk. Regardless, GE remains ” a committed partner to Africa’s sustainable growth,” Immelt said.

The GE Foundation is also focusing on Africa, planning to invest $20 million over the next five years in health programs across the continent to train nurse anesthetists and biomedical equipment technicians.

]]>http://fortune.com/2014/08/04/ge-pledges-2-billion-for-african-energy/feed/0Engine Manufacturing At General Electric Aviation Ahead Of U.S. Manufacturing DatalorenzettifortuneIndia’s Tata earmarks $35 billion to ride the Modi expresshttp://fortune.com/2014/07/30/indias-tata-earmarks-35-billion-to-ride-the-modi-express/
http://fortune.com/2014/07/30/indias-tata-earmarks-35-billion-to-ride-the-modi-express/#commentsWed, 30 Jul 2014 11:31:37 +0000http://fortune.com/?p=757458]]>Tata Group, the sprawling Indian conglomerate with operations from carmaking to IT and hotels, is looking to get even bigger and more diverse.

The Financial Times reported Wednesday that Cyrus Mistry, the chairman of India’s biggest business empire, presented plans at an internal meeting to invest $35 billion in new areas that look likely to benefit from the economic agenda of newly-installed Prime Minister Narendra Modi.

Mistry reportedly highlighted four new areas for growth: defense and aerospace, finance, infrastructure and retail.

A presence in defense and insurance would make Tata, with its huge political clout in India, a potentially attractive partner for foreign companies looking to exploit the liberalization of those sectors. In its first budget earlier this month, Modi’s government raised the cap on foreign ownership in defense and insurance companies to 49% from 25%.

It’s unclear whether the company would aim to build such businesses from scratch or buy in expertise by acquiring foreign companies, as it did with U.K. carmakers Jaguar and Land Rover.

The choice of infrastructure, meanwhile, also fits into Modi’s grandiose ambitions to overhaul urban India with the creation of 100 ‘smart cities’ with state-of-the-art communications technology and more efficient use of energy and water. Those ambitions will rely overwhelmingly on private capital to be realized.

The final sector, retail, is already attracting big investment bucks. Amazon.com Inc. said Wednesday it will invest $2 billion in the country, chief executive Jeff Bezos saying “we see huge potential in the Indian economy and for the growth of e-commerce in India.”

Amazon’s announcement came only a day after its local rival Flipkart Internet said it had raised $1 billion in fresh funding.

Ratan N. Tata, the patriarch who was chairman of the group for 21 years, had already given a hint of the company’s thinking a month ago when he tweeted “we need to stand together to support the new government’s actions to rebuild economic growth and prosperity in India.”

Modi’s victory has already added billions to Tata’s value–TCS shares have nearly doubled this year as financial markets looked forward to India adopting a more business-friendly policy after years of being held back by bureaucracy and often-rampant corruption.

Tata has interests in over 100 companies already, but is largely dependent for its profits on the IT division Tata Consultancy Services and Tata Motors. TCS alone accounts for around 60% of its market capitalization, according to the FT.

No-one at the group’s headquarters in Mumbai could immediately be reached for comment.

]]>http://fortune.com/2014/07/30/indias-tata-earmarks-35-billion-to-ride-the-modi-express/feed/0INDIA-ECONOMY-IT-TCSgeoffreytsmithThis tech could help New York’s power grid handle the next superstormhttp://fortune.com/2014/06/16/this-tech-could-help-new-yorks-power-grid-handle-the-next-superstorm/
http://fortune.com/2014/06/16/this-tech-could-help-new-yorks-power-grid-handle-the-next-superstorm/#commentsMon, 16 Jun 2014 17:09:36 +0000http://beta.fortune.com/?p=547920]]>Eight and a half million people were without power after Superstorm Sandy. There's an irony built into our power grid: Because transmission systems are designed to make sure the power we need can get to us to avoid an extreme event like a blackout, they are more vulnerable during extreme events like hurricanes.

One Scottish company has recently exported part of its staff to the U.S. because it says its technology can help North American utility companies solve that problem. Smarter Grid Solutions believes that an electricity portfolio can be diverse and nimble enough to improve resiliency and handle growing energy demand, but can do so with less waste and at a much lower cost. There is latent capacity in an existing grid; SGS says its technology helps make better use of it.

The company’s technology originated in the doctoral research of its chief technology officer, Bob Currie, now based in Brooklyn's Urban Future Lab. Today, “You make assumptions when you plan [the power grid] that not all of the infrastructure will be available during that worst case scenario,” he says, “when more often than not, it is available."

SGS worked with Silver Spring Networks and UK Power Networks on a project called Flexible Plug and Play, a ?9.7 million (approx. $16.5 million) project that aims to more quickly and affordably integrate additional distributed energy resources--solar farms, wind turbines--with an existing grid.

Silver Spring provides a radio-based mesh network that allows all parts of an energy network to communicate, including SGS’s technology, which governs overall capacity and directs wind energy to storage as appropriate. Based in Redwood City, Calif., Silver Spring is notable for its broad American utility footprint, and seeks to convince those companies to use SGS’s technology. SGS is already working with five of the six distribution operators in the U.K., says James Pace, managing director for European markets at Silver Spring. There are additional opportunities in the U.S. “They have found a sweet spot in the emerging DER space," he says, using the acronym for distributed energy resources.

To understand what SGS does, it helps to think about power like water in a pipe. If the system knows a city needs 100 gallons of water per minute at peak demand, it will build two pipes that can each pump that much water. The thinking: If one pipe breaks, the other can meet peak demand.

But the system rarely sees peak demand. So there is, most of the time, lots of room in the system. Yet if a new supplier would like to start regularly pumping 20 gallons of water--20 more than the system is designed for, excluding redundancy--the operators of the system will say no. What if the new supplier keeps pumping their 20 gallons when the main system is pumping a full 100 and the original pipe breaks down? The system needs to fail over.

Today’s grid, then, has a lot of redundant capacity but little redundant supply. SGS has demonstrated that, using sensors and software deployed throughout a grid, it can avoid the potential catastrophe of using redundant capacity by judiciously and automatically ratcheting down power flow from each source. The company calls the technology Active Network Management.

"Not everyone is going to generate at the same time,” Currie says. “Your worst-case scenario is that they will.” If too much capacity goes over a line, very nasty things can happen: Equipment could fry and overloaded power lines could sag, putting people and property at risk.

In the U.S., companies have been fearful of building too many new energy sources, which would help increase source diversity and therefore resiliency, because in a worst-case scenario--say, the aftermath of a giant storm, during which an unusual amount of energy is needed--they would overload the grid at its bottlenecks. More demand and more supply, but not enough grid capacity in between.

With climate change afoot, the industry is preparing for more extreme events that will tax the electrical grid. Tom King, president of National Grid, a major transmitter of electricity and natural gas, wrote in a February 2014 white paper that "The new and improved 21st century backbone needs to be nimble enough to accommodate the growing demand for both solar and wind-powered energy sources."

Which is why SGS is making waves. Currie started his Ph.D in 2002, sponsored by Scottish and Southern Energy, with a goal to find ways to get more renewable energy onto the existing grid. Currie completed his research but put off writing his dissertation to start the company. His doctoral sponsor invested.

His team was able to increase renewable capacity on Scotland’s wind-rich Orkney Islands by more than 20 megawatts at a cost of about ?500,000 (approx. $849,000) for transmission upgrades, rather than new supply. Under the conventional approach, that kind of capacity increase might cost ?30 million (about $51 million). "This can reduce the cost of connection to wind and solar by 80 to 90 percent," Currie says.

The company has about 45 people on staff and makes about ?3 million ($5 million) in annual revenue. It expects between 40% and 50% growth next year. Its only active project in North America is funded by New York State Energy Research and Development Authority, which set aside a grant of $663,000 for SGS to work with New York University and Consolidated Edison to evaluate how New York City can increase its energy resilience in the near term and what existing technologies could enable ConEd to cost effectively meet the requirements. It's a small project, but with an enormous partner.

As the price of solar energy goes down, wind farms proliferate, and electric-vehicle charging gains popularity, the pressure to better manage flows will increase. "There is much talk regarding the changing utility business model, but at the end of the day, the utility is still responsible for grid reliability,” Pace says. “As more and more renewables come on the market, you’ve got to manage these things as you bring them onto the network.”

There is an adverse side effect of SGS’s technology. Though active network management allows supply to become available faster and at much less cost, it will sometimes turn down a utility’s output, which reduces revenue. What utilities are banking on is that the lost revenue will be a smaller penalty than the upfront cost of new transmission infrastructure or the cascading costs initiated by not doing anything at all.

It’s still early days. "Unless regulators say so, there's not really an imperative to do what we are talking about,” Currie says. “We are asking our customers to do something they haven't done before.”

]]>http://fortune.com/2014/06/16/this-tech-could-help-new-yorks-power-grid-handle-the-next-superstorm/feed/0PacifiCorp Trading Operations And Grid Management SystemsoccerrogueHow to rebuild America without raising the deficithttp://fortune.com/2014/06/02/rebuild-america-infrastructure/
http://fortune.com/2014/06/02/rebuild-america-infrastructure/#commentsMon, 02 Jun 2014 13:00:53 +0000http://beta.fortune.com/?p=488767]]>Is the American middle-class dream dead? The so-called economic recovery, in progress since 2009, has produced little in the way of real wage growth for most Americans. Fewer have jobs, and the median income of those who do is 4.4% lower than when the recession supposedly ended.

Meanwhile the stock market has doubled and the S&P 500 has set new highs, crossing 1,900 for the first time in May.

Those reaping the benefits of outsize capital gains and dividends will tell you that it's not their fault — that this triumph of capital over labor is the inevitable outcome of globalization and technology. Democrats, always adept at identifying the right issues and offering the wrong solutions, want to address the problem through income redistribution in the form of higher tax rates. But before we raise tax rates (again), perhaps we should tackle the policies that are hurting working families in the first place.

Prior to the crisis, both parties embraced globalization as a positive for our economy, without facing up to the inevitable negatives for our workforce. They "financialized" our economy, trying to make up for declining real wages with easy credit, and relying on asset inflation (tech stocks, housing) to generate growth. Even after the financial crisis proved the folly of that model, we are still trying to use it to restart our economy.

The Fed can open the monetary spigot, but it can't force the economy to drink. Structural reforms are necessary to stimulate real economic demand and bring home more and better-paying jobs. We will never compete with Bangladesh in labor costs (and shouldn't), but there are other ways to attract job-producing enterprises: modern infrastructure, a well-trained workforce, a fair, efficient tax code, and (ahem) effective political leadership.

Yet making our economy more competitive is the last thing on Washington's mind. With elections six months away, the White House is pressing the wedge issues of its party faithful, while Republicans stir up their red-meat eaters by launching another inquiry into Benghazi (yawn). Meanwhile America's competitive edge is becoming as dull as the last Spider-Man movie.

Look at the skills gap. Our young people lag behind most developed countries in math and science, yet we lead pretty much everyone in education spending. But Washington still focuses on how much we spend, not how we spend it. For instance, why not offer a break on student-loan repayments for kids who want to become machinists and technicians? On immigration policy we lead with our hearts, not our heads, giving priority to immigrants with family relations over job-producing Ph.D.s.

Our decaying infrastructure is a national disgrace, routinely imposing costly disruptions in communication, power, and transit. With financing costs at historic lows, why aren't we making long-term investments in modernizing our infrastructure and, in the process, creating good-paying skilled jobs?

Our personal and corporate tax codes are riddled with special breaks that distort economic activity. Capital-gains breaks favor investors over workers. Debt subsidies encourage leverage. Uncompetitive corporate rates provide incentives to do business overseas. So IBM IBM gooses its share price by issuing debt to pay for dividends and share buybacks. Pfizer PFE pursues AstraZeneca because it can pay lower U.K. corporate rates. These days executives seem more interested in pursuing profits through tax arbitrage than producing stuff that people want to buy.

Education and immigration reform need not cost money. Much infrastructure repair can pay for itself through tolls. And tax reform, if done right, can raise revenue. These are all fiscally responsible measures that have bipartisan support. They will make our economy more competitive and reverse the decline of the middle class. President Obama needs to decide if he is the "Yes, we can" or the "It's too hard" President. And Congress needs to work with him to get the job done.

Fortune contributor Sheila Bair is former chair of the FDIC.

This story is from the June 16, 2014 issue of Fortune.

]]>http://fortune.com/2014/06/02/rebuild-america-infrastructure/feed/0BAI.06.16.14 road buildingTom Ziegler, producerBAI.06.16.14 wages chartBridge building and infrastructure in the Age of Austerityhttp://fortune.com/2012/08/03/bridge-building-and-infrastructure-in-the-age-of-austerity/
http://fortune.com/2012/08/03/bridge-building-and-infrastructure-in-the-age-of-austerity/#commentsFri, 03 Aug 2012 16:04:30 +0000http://test-alley.fortune.com/2012/08/03/bridge-building-and-infrastructure-in-the-age-of-austerity/]]>Public opinion has soured on infrastructure projects. Slashed budgets and The Bridge to Nowhere certainly haven't helped, but Ted Zoli's projects represent a consistent bright spot in an otherwise muddied profession. The 2012 Engineering News-Record Award of Excellence winner talked to Fortune about designing bridges in the age of government austerity.

You're bridges are very economical, especially considering public works today have a habit of spiral out of control cost wise. How do you accomplish this with your works?
If we think about structural systems these days in the developed west, one thing that is very clear is designing a difficult to build bridge with the least materials is not a great strategy for cost effectiveness. There are more labor costs associated with the final construction cost of a bridge now than in any time in the past, and certainly that trend will continue.

So to me, it's being quite careful about how bridges are built and integrating the construction strategy into the design. That helps to keep projects on budget or maybe to build projects for much less.

I'm also very interested in making structural systems safer. One thing that you may find surprising but is certainly the case is that material efficiency or when you're minimizing materials, does not necessarily make the safest structural system. I'm interested in those opportunities where a structure is easier to fabricate, construct, and is safer, yet is less expensive because you're being very careful about the costs associated with its construction.

Do you think that the failure of others has led to a lack of confidence in architects and engineers for public works? If that lack of confidence does exist, how do we fix that?
I'm going to maybe argue slightly with the idea that it's maybe not a lack of confidence. What I think what we've tended to do as a culture is we've looked at public works projects like infrastructure, like bridges, as the last bit of public architecture that we have.

We're not building libraries and state buildings anymore, so the space in which we think about building iconic structures is often tied to public infrastructure. Iconic structures in many circumstances can be something that has loftier expectations and budget than something more austere, more functional as bridges have been traditionally.

For me, I'm very interested in the space where the right structural system, the right form, and the right construction method can still be iconic. It can still scratch that itch that we have I think in the need for public works projects to be a great representation of a community effort to make something better. I think often times bridges are that. It really takes a commitment on the part of a large community --sometimes cities, states, the federal government and the resources agencies. These are projects that involve many, many indeed contributions from many, many sources. It's natural to see this as a coming together and to want to achieve something important, especially for something that is a major crossing.

The downside is that in many circumstances we have built infrastructure that doesn't respect in a way the simple logic that it's taxpayer's money and we have very little of it -- these days particularly. To me, it means a certain sort of austerity is necessary. Particularly in these times since 2008, it comes into focus how we have many needs and very little funds.

To some degree, over budget public works projects were tolerable when tax revenues were up. When tax revenues are down and we are really struggling to stimulate the economy and produce jobs, austerity in our design and some care that we are right sizing projects and being responsive to budgetary concerns is the call of this day.

I think we need to be an industry very creative about delivering a lot for a little.

How do you provide a lot for a little, especially considering the lack of funds at all levels of government for these public works projects?
There's a couple of different strategies, but I would say trying to understand what goes into the cost of a bridge and how can there be innovation on the fabrication process, on the erection and even the transportation of the pieces of a bridge to the site. How all those things go together is a wonderful opportunity for a designer to look at the whole cost of a public works project, try to innovate in that space, and step outside of purely the traditional role of the engineer, which is to make sure the stresses work and the structural system has adequate safety. It's instead to take a broader look at what costs money in public works projects and see if there are not ways that the designer can innovate to get at some cost savings.

Certainly some of my work has been successful with that. Some of my work I would say is an experiment and experiments are something that you learn from. I certainly have made some mistakes that I have learned from and lead me to believe that are benefits to these strategies and some cautionary tales. It's not a perfect environment but there's a richness in understanding the way a bridge gets built that gives you an opportunity to change your design. It influences the way your think about design tremendously and I try to lead with that in many circumstances.

I'm very curious about how big a piece I can ship? What kind of crane do I need to pick it up? At the fabricator shop, what technique will he use whether it's pre-cast concrete or structural steel? What techniques are cost-effective and what are not? There are a lot of opportunities for engineers to broaden their perspective about what it is they're designing and to get into looking at these other aspect of what makes a bridge cost so much.

Do you think the future of bridge building is trending toward your type of work -- the economic yet aesthetically pleasing variety?
Ha-ha! I'm not so sure but it certainly has given me many opportunities to design bridges with that model and hope to have more in the future.

I would say there are many different types of projects with many different types of aspirations and maybe it's fair to say that the designer gets mapped to the right sort of opportunity.

I hope to remind people both in my industry and the public that when a bridge gets built it's with their money and they own the bridge. It's really there's. So given that it seems no one likes to pay their taxes and almost no one sees the connection between their taxes and a better life, bridges in my view are a way to reconnect that sort of trust.

Now this is sort of farfetched hope, but when people pay their taxes and they have world-class infrastructure - they have a great commute, bridge, or efficient mass transit - that they think to themselves, "My tax dollars went to something valuable." If we can connect that value, some tax dollars to great infrastructure, we would do our industry a great service and also help everyone recognize how invaluable and what the right role of government is to making our lives better.

FORTUNE — Amid all the bitter wrangling between big business and the White House, there is one point of agreement: the need to rebuild the nation’s roads, bridges, and rails. The U.S. has fallen from eight to 16 on the World Economic Forum’s infrastructure rating; one bipartisan report cites a $200 billion annual shortfall just to maintain our current transportation network. But in these tight economic times, who’s going to pay? We took that question to Matt Rose, who heads BNSF, North America’s second-largest rail freight system, and is a member of President Obama’s jobs council.

Q. Why should we worry about this now? Can’t we muddle through until the economy rebounds?

A. Infrastructure investment can be part of how the economy rebounds. It increases the competitiveness of the American worker. The cost of congestion raises the cost of transporting goods and makes the American economy and worker less competitive. It’s also job-stimulative. We can create middle-class jobs. For example, we have all these returning veterans who had been building roads in Afghanistan and Iraq and are now having a hard time finding jobs.

The President’s stimulus bill made the same claim — and unemployment went up.

That bill had an infrastructure element, but it wasn’t an infrastructure bill. Project after project wasn’t shovel-ready because we don’t have permit reform. We need to speed up environmental and other approvals that add years to the start of a project. There also needs to be accountability. The American people are jaded with the “bridge to nowhere” and other projects driven by politics. They don’t trust the government to spend money wisely. And let me add this: There are 107 federal programs dealing with infrastructure. You can’t do anything well with 107 federal programs. You have to create very specific goals and incentives for the states.

The American taxpayer is not exactly in the mood to pay for any of this.

Well, first, we’ve done a lousy job of explaining how we pay for our infrastructure now. We have had an 18.5? federal gas tax since 1993 to support the Highway Trust Fund. But now that is worth only about 12? because of the rising costs of steel and concrete. We have a dependency on foreign oil and want a clean environment, so we’ve raised mileage standards. That hurts those receipts coming into the trust fund. That said, we’re not going to raise the gas tax.

So where does the money come from?

I would be much more aggressive placing tolls on roads and bridges, which would create a revenue stream that can be leveraged. There are hundreds of billions that could be raised from pension funds, trust funds, even foreign investors.

This administration wants to make big bets on high-speed passenger rail. How realistic is that?

You tell me what the price of gas is, and I’ll tell you what I think of high-speed rail. Unless we want to price gasoline like Europe, I don’t think European-style high-speed passenger rail will ever be workable. Maybe we’ll see it work in the Northeast corridor and California — but to build out the top 30 cities on high-speed rail would cost $1 trillion.